March 7, 2013
Building a better philanthropist
In the last couple of decades, a tectonic shift has altered the landscape of Jewish philanthropy. The phenomenon is not only Jewish — the number of foundations in the United States has grown fivefold in the last 20 years; the same growth in donor-advised funds has taken just a decade.
The relative weight of independent philanthropy — as opposed to communal giving — has gone off the charts. The Jewish Federation system in North America holds an impressive $15 billion of philanthropic assets, but based on conservative estimates, the overall “pie” of Jewish philanthropic assets is more than $75 billion.
And the change isn’t only quantitative: funders approach giving dramatically differently now. They seek greater engagement, they seek to focus and direct their contributions and they don’t feel bound by lifelong loyalty to a given organization. If, a few decades ago, a donor was perceived as a “tool” that enabled an organization to do good and fulfill its mission, that’s been upended: now it’s funders who regard organizations as tools to realize a personal vision.
Some decry these changes, seeing them as a challenge to the traditional Jewish values of communal philanthropy. They fear that independent philanthropy will weaken the collective and give way to whimsical and disjointed funding. It’s a valid criticism, but taken too far. This individual empowerment isn’t a fatality; it’s the opposite. This is an era in which a kid can start a revolution from her cellphone, or create one of the world’s biggest companies from his dorm room. This brave new world in which everybody is an entrepreneur offers enormous possibilities for the Jewish community. Independent philanthropy opens the way for an explosion of creative energy and innovative thinking. It is “good for the Jews”: It ushers in an era of greater creativity and entrepreneurship. It opens new ways for engaging major donors — their wealth and talents — in proactively solving the big problems our generation.
Still, though promising, these new opportunities present very real dangers. While some funders are literally changing the world, Jewish philanthropy as a whole is, sadly, underperforming. Many funders haven’t yet taken on the responsibilities that come with their newly acquired leadership mantle. Some haven’t yet discovered that in philanthropy, as opposed to business, excellence is self-imposed. In the open market, a business that doesn’t deliver value is punished with bankruptcy; in philanthropy, we can just keep sending good money after bad. The challenges we face as Jews in this early 21st century are so new and difficult that good-enough philanthropy is not good enough.
So how can philanthropy live up to its promise? How can it be the engine of innovation, creativity and solidarity in the Jewish world? Here are a few things that I believe Jewish philanthropy needs:
1. Strategy: Developing a philanthropic strategy is critical to be an effective funder. Being strategic implies defining areas of focus. What are the problems that your philanthropy will try to solve? What are the ways in which you are going about doing that? In business, the lack of a sound strategy means bankruptcy; in philanthropy, it can lead to irrelevance.
2. A healthy — and complementary — relationship with communal organizations: Some see the role of independent philanthropy as antagonistic to the role of communal organizations like federations. They are wrong. Independent philanthropy can exist only within the context of a strong community. Philanthropy can be strategic only after the “safety net” is guaranteed and when basic services are provided. Independent funders can be strategic in our funding because somebody is already paying the heating bill. Funders have a responsibility to keep that basic communal infrastructure going. It’s true that many communal organizations are stuck in the old paradigm, but many more are not; they’re willing to partner with funders and respect their independence and areas of focus. Independent and communal philanthropy are two legs upon which the Jewish community stands: One maintains the fabric of the community, the other moves the needle on specific issues and addresses specific challenges.
3. Networking: The times of go-it-alone philanthropy are gone. The problems we face are too complicated, too complex. Even our biggest foundations can’t solve them alone. But there’s hope: If individuals in this 21st century are hyper-empowered, they’re also hyper-connected. Networking allows for collective action on specific issues without drowning the individuality of each funder. Networks are fluid, ad-hoc coalitions in which we can define and solve problems together. But networking necessitates a different mind-set, one in which information and ideas flow freely; one in which leadership is distributed and sharing trumps owning. From our own community, the amazing success of Birthright is just one example of funders with shared interests working together, achieving results they could not have if they’d gone it alone.
4. Measuring the right things: We struggle to make data-driven decisions. We don’t measure enough and when we do, we still often measure the wrong things. Donors have an obsession with overhead, as if it was the ultimate indicator of an organization’s performance. It is not, and by obsessing about it — and cutting it — we prevent organizations from building capacity and fulfilling their mission. Good measures are those that measure impact, especially long-term impact. Granted, this can be hard and expensive to measure. But measuring the wrong things is not the solution. Investing in capacity to allow organizations to measure themselves is critical for high-performing philanthropy.
5. Experimenting and taking risks: Foundations have a flexibility that public organizations don’t. They can have a much more open attitude to risk and innovation. In an uncharted world in which the old recipes don’t work, taking risk is more necessary than ever. Embracing creative failure and knowing how to learn from it is critical. The problems we face need a lot of trial and error, because there are no silver bullets. In our uncertain world, knowing how to fail is the key to success. And as funders, we need to also experiment in the philanthropic vehicles that we use. Let’s explore new philanthropic tools like venture philanthropy, impact investing, giving circles, and more.
Jewish philanthropy needs to climb up to the next level. It is important to be really smart about giving, and we are way smarter when we learn with and from each other. The next decades are going to see the biggest transfer of wealth in human history: In the United States alone, $41 trillion are going to be passed from one generation to the next. That adds urgency to these words. Not only is important to be strategic about philanthropy now, it is critical to pass on these concepts to the next generation of potential funders.
The challenge is big, the promise is enormous. The time for action is now.
Andres Spokoiny is president and CEO of the Jewish Funders Network, whose annual international conference is March 17-19 in Los Angeles.